India’s wheat stocks set to fall to 10-year low, beckoning imports

India’s wheat stocks in April next year, when the new season begins, are likely to be at their lowest levels in more than a decade after two successive droughts sapped the soil of moisture and cut output, traders and industry experts said.

Lower stocks will force India to import about 6 million tonnes of wheat in the fiscal years ending March 2017 and March 2018 to curb local prices, which have leapt 40 percent since the current year began in April 2016, they said.

Of the 2.7 million tonnes contracted for import since April 2016, 2 million tonnes has arrived at various ports.

“We expect about 3 million tonnes of imported wheat this year and almost a similar quantity next year as stocks at FCI will fall a million tonnes lower than its target,” said Tejinder Narang, a New Delhi-based market analyst, referring to the state-run Food Corporation of India.

The government-backed body buys grains at a state-set price from local farmers to build reserves to run a mammoth food welfare plan which entitles about 67 percent of India’s 1.3 billion people to ultra-cheap wheat and rice.

According to a government target, on April 1 the FCI must have at least 7.5 million tonnes of wheat at its granaries.

“It’s psychologically unnerving to see stocks falling below the target. We haven’t seen such precariously low stocks in the recent past,” said Narang.

India, the world’s second-biggest producer and consumer of wheat, lowered the import duty to 10 percent from 25 percent in September and this month removed the tax, boosting imports from countries such as Russia, Ukraine and Australia.

It could also be a problem for Prime Minister Narendra Modi’s Bharatiya Janata Party, which goes to a crucial election in Uttar Pradesh, India’s largest state where farmers form a large voting bloc.

“Framers are sowing wheat but unwittingly they will be deprived of good returns on their produce when they harvest the crop,” said Dharmendra Kumar, a farmer from Uttar Pradesh.

Indian farmers grow only one wheat crop in a year, with planting in October and harvests from March.

By abolishing the import tax on wheat, the government has decided to help farmers abroad, Kumar said.